rs' that Mr. Eull Youqbloed ovna these mlnlng alalma, alad that the pdnolplo mfnarala to ,ba mined ara lead vlth a poasibll- lty of w.me l llver. The United Btake &Vern- ment has proposed to par ubsldj OF pralu to l noourage the mining of thee* sttitoglo hetals auah premium vould probably ti from 2# to 4 ,i per poun$ on the prooemoal metclr. *2 Honorable Bsscom Giles, CommLesioner, P&e 2

Furthemore, it apperrm that the aelter 8aetlm.s pays the frel8ht on tho ehlpmant of ors to ths smsltar, but before making its net retums to the ovner or operator of the olalm, tbr smslter dmlucts vhatevor tzunsportatlon oosts have been p&l by it for ors shlpnonts. In oonneotlon with tha faots hsrelnabovo set out, you have roquostod the opinion of 'this department vlth re- spot to ths r0il0va two questlonsr

1. In oaqmting the #$ rqslty duo the Btato from ml.nlng alalm by virtue of Article 5395, lWYl8ed Civil Statutes, 1925, as amend& should you lnoludo In hour aaloulation based 011 smsater mturns the &ovemmsnt subsidy or pmlums paid to enoourege the sllnlng or thme stratoglc aletals4

2. In casputlng the 6@ royalty due the State frcmn olInlag a1alm.s by Yirtus or Artlole 5395. FulYl8ed ClYll statutes, 1925, as amuulsJd, rhaultt~ou inalude in your oalaulation bamd on smoltor returns the transportation ooats '*id by the kiter for the shi~ent of the on from the pins to ths smelter. vhloh aoats ths smslkr deduots bsfon making hls net rstum to ths ouner of ths olslm?

From Artlclo 53 5, Reviosd Civil Statutes, 1925, as maendod by Acts 1934, e 3ru Loglsletum '2nd U.S., page 51, ahpter 20, paxugnph 8~ Aots 1935, '4th kglslatum, Reg. Sems., pngm 56, chapter 29. I 1, vo quots the follwing portions tharoof vhioh are portlneat to the questions sub- rlttedr

. . . In addition ta rental paponts, the wnk'of such claims shall pa7 a royalty of 6# of the value of,t& pmauatlon of tha mlnsnls upon such alalm as shorn by the net smoltor, . . . . rsturns orofthe gross sums rlslng from the sale of ths ors or produots from the olalm and xwoelved by ovner. . .m A subaldy has been dellned as e grant of funds fram 6 govennnent to D. private lndlvldunl or ampany to asalst

I’. ;. , in the estebll&ttnt or support cf 8n enterprise deemed advantagecue to the public. 6: Corpm Jurlsji~~rd;~O Phrases, Permanent Edition, vclumc 40, psgc

Webstarls Rew Internatloml Dictionary, 2nd edition, ve quoter

“A oubsldy may be ulmyly G Gift. or con- sist In the psyment of . . . . funds to aid ln establlshlng or malnttlinlng o servlca or equipment larger or uore poverfr;l thnn the state of tr6d8 vould~ vnrrunt . . . .' Under the pro~islons of Article 5:9fj, herein- above sot out the stats of Toxns is entitled to e royal- ty of 6&$ of 'the value of the production of the ml.nsrals upon aaid clslm ss uhovn by the net smelttw returns.' The amounts of aoneys to be paid by tlw Yoderal Govemsmnt as set out ln the fuots herein la in the nature of a subsidy, sn outrQht gift or gr6nt i.g Cie Pedoral Oovbrnment, to the claim ovner who mlnss the nlne~ls, and 1s to be paid on acoount of h:s, cooperation in the piers of the Govarn- ment. in aid of the mini of these strntegla metals. Durr Drug Comp.%y ~8’. Aoms, 27 So. (2d) 90:, at p6ge 907 S 13.

Such sum bslng In the nature of s premlxss, a gift, a sub- sltly, am not lnnaludable In tiuc cas~utatlon of the "value 0: the miners1 upon said clulm," snd the 0r ths pFodu0tion State of Texas should'not share therein. Our nnaver to the first question submitted herein ia, therefore, in the neg- ative.

The ssme quoted pro~lsion of Artlole 5335 pro- vides also the basis upon vhloh to compute the royalty pay- able to the Stats. It provides thst the State 1s entitled to s’royalty of 6&Y of the value of the production of the mlnersls upon said clslm as "ohovn by the net smelter . .

. . rilturns.* (Underscoring oura) . . The Etattod heremsclose that vhen the smelter pays the trsnspor- tatlon costs for shlpolent of the oxw to the smalter, it doduots these costs before making lts net return to the olalm ovneti. It 1s our opinion thnt the tern 'net smel- ter return" as set out in the rtatutes means that amount returnable to the clnlm owner vhlch lo clesr of, or free from, a31 ohsrgea, or deductions for transportations costs, *4 Honorable Bcinom Oil-, Commlclsioner, page 4

paid by the emelter. A oomputatlon or amcertalnment of i-oyalty due the ?!tato baaed on net welter returns vhlch vould lncludo therein tranaportotlon corte. refomd to henin, vould be erronooum ln one other respect; that la, the resultant amouat vould be an ullovanae to the St+te of a royalty larger in amount than 6& of the value or the produotlon of the rinonla u?on acrid olat am provided for ln the maid statute. We, therefore ansvor recond ubrltted question ln the negative.

Youm very truly ATTOHREY OENERAL OF TXXAS Cheater X. Ollimon ADai t8Iit /----‘..L

APPROVED ‘\